What You Should Know Before Starting a Nonprofit

So, you’re thinking of starting a nonprofit organization. That is certainly a worthwhile endeavor; however there are a few things worth considering before you actually launch your nonprofit.

A nonprofit organization is defined as “a group organized for purposes other than generating profit and in which no part of the organization’s income is distributed to its members, directors or officers. Nonprofit organizations include churches, public schools, public charities, public clinics and hospitals, political organizations, legal aid societies, volunteer services organizations, labor unions, professional associations, research institutes, museums, and some governmental agencies.” (Cornell University Law School) These organizations are granted tax-exempt status by the Internal Revenue Services.

Starting a nonprofit requires a lot of time, hard work and patience, but there are some crucial matters you need to consider before you start a nonprofit.

Is there a need?

The fact of the matter is that there are already more than 1.5 million not-for-profit organizations in existence today. (National Center for Charitable Statistics) If you look closely enough, you might find that there is another NPO already working towards or fighting for the same cause you are interested in. You need to think long and hard and ask yourself: Is there really a need for your nonprofit? If there is already another group doing the job, would helping them be more effective rather than starting your own and competing for funds? Whether you believe it or not, often the best way to serve your cause is to not start a nonprofit – rather, finding a way to extend and support the work that is already being done by volunteering, working with or donating to that preexisting organization might yield better results more quickly. You can check if a nonprofit such as the one you want to put up already exists by searching on Charity Navigator, Idealist, or GuideStar.

What is your organization’s mission?

Basically, you have to define what your organization is about and what goal you are trying to achieve. This will help you steer your nonprofit in the right direction. With your end goal in mind, you can determine which activities are worth pursuing and which ones you should say no to in order to effectively allocate resources and manpower.

Are you willing to relinquish control?

One of the important things you need to consider is whether or not you are willing to give up control of your organization. The IRS requires nonprofit organizations to have a board of directors in place in order to grant it a tax-exempt status. This means that you will not be solely in charge of making major decisions for the organization, such as on how the company is run or how the profits are allocated. The good thing about it is that you can take part in selecting who will be on the board of directors. You can choose individuals whose objectives and interests match yours; however, it is not unheard of for founders and members of the board of directors to disagree in some cases. The important thing to remember is that you should regard your board members as valuable sources of information, wisdom, and enthusiasm for your cause, instead of just looking at them as unwanted but necessary for governmental compliance.

How are the nonprofit organization and its activities going to be managed?

Most nonprofits are run with the help of employees and/or volunteers. It is impossible for one person to fulfill the day-to-day operations of a company, no matter how small it is in the beginning. You and your board of directors can start by running the nonprofit in the beginning, but as your organization grows, you will need to hire people to ensure that it is running efficiently.

How will you pay to keep your organization running?

You must consider how much it will cost, not only to start your own non profit, but more importantly, how to keep it running and how you will pay for it. You need to carefully and thoroughly plan a budget, whether you expect your funds to come from donations, grants, program fees or some combination of these.

Are you ready for the amount of paperwork that needs to be accomplished?

To say that starting a nonprofit and running it involves a lot of paperwork is an understatement. Remember that in order to achieve and maintain tax-exempt status with the IRS, you will undergo thorough examination and supervision. You will need to submit to specific state and federal regulations in order to stay in compliance. In addition, you must consistently adhere to transparency, regulations, and procedures in place especially when it comes to financial and service records in order to be able to provide the community and other stakeholders with reliable, accurate information about the scope and value of your nonprofit’s work.